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1976 Supreme(Cal) 275
High Court of Calcutta
A.K. Sen, M.N. Roy, JJ.
Moni Prosad Singh – Appellant
Versus
State of West Bengal – Respondent
Decided On : Aug 08, 1976
Samarendra Nath Dutta, Satya Ranjan Sen
Transfer of goods between two firms with identical partners does not constitute a "sale" within the meaning of the Bengal Finance (Sales Tax) Act, 1941.
Headnote:
SALES TAX - Transfer of goods between two firms with identical partners - Whether constitutes "sale" - Interpretation of "sale" and "person" under the Bengal Finance (Sales Tax) Act, 1941.
Fact of the Case:
The appellants, co-partners in two separate businesses, transferred machinery worth Rs. 79,318.11 from one firm to another. The Commercial Tax Officer treated the transfer as a sale and levied tax. The appellants claimed that the transfer was not a sale but a mere transfer between allied concerns and sought deduction under section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941.
Finding of the Court:
The Court held that the transfer of goods between two firms with identical partners does not constitute a "sale" within the meaning of the Bengal Finance (Sales Tax) Act, 1941. The Court relied on the definition of "sale" in the Act, which requires two different persons in the ordinary sense of the term "person." Since the partners in both firms were identical, the Court held that there was no "sale" and, therefore, no tax liability.
Issues: Whether the transfer of goods between two firms with identical partners constitutes a "sale" within the meaning of the Bengal Finance (Sales Tax) Act, 1941.
Ratio Decidendi: The Court held that a "sale" requires two different persons in the ordinary sense of the term "person." Since the partners in both firms were identical, the Court held that there was no "sale" and, therefore, no tax liability. The Court relied on the definition of "sale" in the Act, which requires two different persons in the ordinary sense of the term "person." The Court also relied on the decision of the Madras High Court in Mahendra Kumar Ishwarlal and Co. v. The State of Madras, which held that "to constitute a "sale" within the definition of that word in the Central Sales Tax Act, 1956, there must be two different persons, in the ordinary sense of the term person. When two firms having identical partners transfer goods from one to the other, it will be really a case of one person transferring goods to himself and there will therefore be no "sale."
Final Decision: The Court allowed the appeal, set aside the impugned orders, and directed the Respondents not to act on the basis of those orders or to enforce them. The Court also clarified that its order would not preclude the Respondents from proceeding afresh in the matter and making a fresh assessment if they were so advised.
1. THIS appeal under clause 15 of the Letters Patent is directed against the judgment and order dated May 13, 1973, whereby P. K. Banerjee J, discharged Civil Rule No. 4279 (W) of 1968.
2. THE appellants at all material "times, as co-partners of Howrah Wire industries (hereinafter referred to as the said Wire Industries) carried on business amongst others in the manufacture of wire, wire nettings and different kinds of machineries for the purpose of manufacture of machineries for making barbed wire, wire nail, staple, panel pin and wire drawing, at 59, Canning Street and held Certificate of registration No. AT/3347a under the Bengal Finance (Sales Tax) Act. 1941 (hereinafter referred to as the said Act. They were also co-partners in another business under the name and style of Howrah Steel and wire Products (hereinafter referred to as the said Wire Products) at the said address of 59, Canning Street under registration Certificate No. AT/3755 A issued under the said Act and employed amongst others in the manufacture of mild steel wire and Galvanized wire. '
In or about 1960 the appellants transferred machineries on diverse dates worth about Rs. 79,318. 11 p from the said Wire Industries to the said wire Products, and the Commercial tax Officer concerned treated the said transfer as sales and by his order in annexure "c" dated March 29, 1963, assessed them to tax. It is an admitted fact that the appellants filed a return showing the gross turnover at Rs. 6,21,821. 32 p. Thereafter, at the assessment stage, they filed a revised return for the month of December 1960 reducing the gross turnover from Rs. 1,87,074. 35 p to Rs. 1,08,336. 34 p. claiming that machinery worth Rs. 72,478. 61 p and Rs, 6,830. 50 p which were transferred to the said Wire Products, is an allied concern of the partners of the said Wire Industries. The relevant bill No. 73/60 and 74/60 were wrongly shown as sales in the original return and contending further that those were mere transfers and not sales. It was also contended that those transfers were shown as sales by mistake. It is also an admitted fact that taking those transfers as sales, the appellants preferred claims for deduction of the amounts as mentioned hereinbefore, under section 5 (2) (a) (ii) of the said act. It is also apparent from the records of this proceedings that Bill No. 73/60 as aforesaid was for Rs. 38,900/-and the appellants have shown Rs. 32,060. 50 p out of the same on account of sales of machineries and the balance of Rs. 6,839. 50 p on account of transfer to the said Wire Products. It was contended on behalf of the appellants that the transfer of machineries being from the same partners of one partnership business to another partnership business, could not constitute "sale" within the meaning of the said Act.
3. THE Respondent Commercial tax Officer by his determination dated march 29, 1963, found that the concerns as mentioned hereinbefore were owned by the same partners but the said concerns were two distinct and separate entities and the transfers between such separate entities cannot be made except on sale. Apart from the above, on the basis of the initial admission of the appellants and more particularly in view of the fact that the transactions were claimed to be sales, the contentions of the appellants were rejected. It was also found by the said commercial Tax Officer that the connected vouchers as produced being partly for sale and partly for transfer, they could not be considered anything but for sales and furthermore the appellants made whimsical entries showing the sales as transfers. The taking out of separate licenses by two concerns, filing of separate returns by them and over and above the claim for exemptions as mentioned hereinbefore were also made grounds for rejecting the contentions of the appellants and the determination of sale and levy of demand in the instant case.
4. FROM such determination, the appellants preferred an appeal (Appeal case No. 176/63
